Indiana Securities Division

Beware of the pitfalls of fraud found online

(originally published August 2010)

When people join online dating sites, they are generally looking for companionship, not a good investment opportunity. When they join business networking sites, they want to find contacts, not fall for a scam. Unfortunately cases of investment fraud that started out in unexpected places like dating sites and social networking sites are popping up more and more. As technology continues to advance, fraudsters are adopting more unconventional approaches to soliciting victims, and Hoosiers should know what to look for to avoid falling prey to these scams.

Earlier this year, the Indiana Securities Division worked to obtain a criminal conviction of an Indiana woman who solicited victims using the website Craig’s List. In addition to asking people to invest money in her fake company, Wanda Robertson also asked for their personal information. She later used this information to apply for loans and credit cards. Following the investigation by the Indiana State Police with assistance from the Prosecution Assistance Unit, Robertson plead guilty to three Class C felony violations of the Indiana Securities Act – and was sentenced to four years in prison, to be followed by four years of probation.

And there are many other examples from all across the nation. Investment fraud perpetrated online is one of the fastest growing types of fraud. This month, my office is launching an online campaign designed to raise awareness about investment fraud over the internet by targeting those who may be most susceptible to falling victim. We are going to proactively fight fire with fire by inserting our educational message into the spaces where fraudsters potentially solicit victims.

Fraudsters continually look for new ways to scam people out of their money, and the Internet provides a unique opportunity to do just that. The Internet is completely anonymous, for the most part; so it can be very difficult to know if the person on the other end of the computer is who they say they are.

It’s important to treat online investment opportunities like any other – take time to research the person’s work history, licensing status and any previous disciplinary actions. You can investigate the investment and the person or company offering the investment by calling the Indiana Securities Division at 1-800-223-8791 or using the searchable databases online at www.IndianaInvestmentWatch.com.

Another important action you should always take is to meet in person to discuss the investment opportunity. You can typically get a better read on someone when communicating face-to-face versus over the internet. Also, make sure you get written information about the investment – not just via e-mail, but in hard copy. Every public investment should have a circular or prospectus that outlines the details of the investment. If they don’t want to put anything in writing, it’s probably a sign they aren’t legitimate.

And be cautious with your personal information, especially you giving it to anyone online. Don’t give out your name, address or other personal data unless you have verified that the company and/or individual are legitimate.

Finally, don’t be fooled by promises of high returns that are “guaranteed” to make you money. Fraudsters routinely promote rates of return that are flat out unrealistic in an attempt to lure victims. They might also tell you that the investment is a limited time offer and you have to act right away. Their goal is to prevent you from taking time to research the opportunity.

Online investing can be a convenient way to manage and grow your money when working with legitimate financial services professionals. However, it is important to keep in mind the basics of smart investing: do your research and always use caution before entering into an investment opportunity.